“Financial independence” in some ways is defined as when your passive income (i.e. income you receive outside of your day job) exceeds your expenses. But before you reach that point, there are other levels of financial freedom along the way.
The first level of financial freedom is when your income exceeds your expenses. You reach subsequent levels of financial freedom the wider the gap is between your income and your expenses.
For me, my most recent raise increased my internal level of financial freedom significantly. I was already comfortable with my monthly cash flow, but that last raise made me completely comfortable with my monthly cash flow. I now have about $2,000 in extra money per month after maxing out my 401(k) and taxes and my bonuses almost doubled from last year.
So long as I get a reasonable amount of enjoyment out of my job, this level of financial freedom is pretty sweet.
The next big level of financial freedom is when passive income meets expenses. That is quite a few more years away, but slowly over the next decade, my passive income will build up and I’m really enjoying watching it.
The third level of financial freedom, which I don’t want to ever reach, is when passive income / safe withdrawal of principal exceeds expenses by such a wide margin that one really never has to do any form of work ever again and could buy way fancier cars than I want.
Me? I love my job and my coworkers. Writing and designing code, mentoring junior engineers is fun. It’s a bonus that it comes with such a high income. I don’t need to spend it all and my expenses have stayed somewhat stable, so I’ve been banking more money each year. (This year, assuming I keep my job through the end of the year, I will gross almost $100,000 more than my expenses.) Eventually, my passive income could meet my expenses, but seeing as that’s a decade out, what I need to in the meantime is enjoy my life, not worry about money so much, and keep saving and enjoying my job.
P.S. I’m finally able to guess when guys are asking me out. This definitely results in more dates.